The Deutsche Asset and Wealth Management managed Global Climate Partnership Fund (GCPF) has published its latest annual report, describing a successful year in financing economically viable and sustainable projects in developing countries. The fund is a strong example of international climate finance.

The GCPF’s total investments (both disbursed and committed capital) increased by 45% to US$228 million. The portfolio of investments is primarily in the form of loans to local banks that now include banks in ten countries on 4 continents. Combined with the help of the fund’s technical assistance facility, this investment increases the capacity of these financial institutions to provide their own loans to local projects which reduce carbon emissions. On average, funded projects created a 42% carbon emission savings, well above the fund’s minimum target of a 20% carbon savings.

Examples of the local projects that were supported

Ukraine’s Ukrexim Bank providing loans to 10 projects including a solar PV power plant in the Vinnytsya region

Ecuador’s Banco Pichincha providing more than US$4 million in consumer loans to allow hundreds of families to have more energy efficient fridges and appliances

Brazil’s Banco Pine providing a US$5 million loan to the ceramic tile manufacturer Portobello for replacing the firm’s old roller kilns with more efficient European technology, achieving a 25% emission reduction and lower energy use

Senior loans were also made to Nicaragua’s Banco de la Producción, Mongolia’s XacBank, Vietnam’s Vietinbank, Sri Lanka’s PanAsia Bank and India’s Ratnakar Bank. The fund also made two direct investments in South Africa. A subordinated loan was provided to Hidoplex, a company installing energy efficient technologies in the telecommunication sector and debt financing was provided for a solar PV plant at the Cronimet chrome mine.

The fund does not intend to provide resources in areas where the private sector can already satisfy the financing needs of sustainable energy investments, nor does it seek to compete with subsidized investments. Instead, it strives to provide financial resources in areas which do not require subsidies in order to unleash their potential but are currently insufficiently served by private financiers.

The fund is structured as a public-private partnership which allows public financing to catalyze private investment. The first private investor (a German doctor’s pension fund) made a $30million investment into the fund in 2012. Germany’s Federal Environment and Building Ministry increased its investment by US$13.6 million to reach US$55.5 million and the United Kingdom’s Department of Energy and Climate Change became a new investor with US$50 million. This public investment provides a risk cushion that will allow the fund to continue to grow. In total, the fund has US$326 million of commitments and an intermediate fund volume target of US$500 million but does not have a limit on the fund’s ultimate size. The fund is a strong example of international climate finance and the international goal of providing $100 billion of support to developing countries.

The highest recognized standards for the management of social and environmental risks

GCPF seeks to maintain the highest recognized standards for the management of social and environmental risks in its operations. The last year also saw an audit which concluded that the fund’s Social and Environmental Management System is being properly implemented with no material gaps.

The fund is also an example of the growing market of ‘impact investing’, as the fund intends to make a financial return and create measurable environmental and/or social benefits. 2013 was the second year that GCPF was able to pay out both target and complimentary dividends to its shareholders, thereby proving its continued profitability.

The Sustainable Investments Group

GCPF is one of several funds with a total of €1.1bn of assets under management in the Sustainable Investments group of Alternatives and Real Assets in Deutsche Asset and Wealth Management. Other funds in this group include the

International climate finance

US$ 326 million

of commitments in total are being managed by the fund

Combine financial return and measurable benefits

The Global Climate Partnership Fund is an example of the growing market of ‘impact investing’, as the fund intends to make a financial return and create measurable environmental and/or social benefits.

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